THE HON BLE SRI JUSTICE V. RAMASUBRAMANIAN AND HON BLE SMT. JUSTICE T. RAJANI I.T.T.A.No.582 of 2017 JUDGMENT: (Per VRS,J) Revenue has come up with above appeal under Section 260A of Income Tax Act, 1961, challenging order of Income Tax Appellate Tribunal deleting penalty levied under Section 271 (1) (c) of Act. 2. Heard Mr. K. Raji Reddy, learned senior standing counsel for Income Tax Department, appearing for appellant. 3. respondent/assessee was engaged in business of setting up integrated textile park in Special Economic Zone at Visakhapatnam. They filed return of income for assessment year 2011-2011, declaring total loss of Rs.43,52,78,405/-. 4. case was converted into scrutiny and Assessing Officer made addition of Rs.5,21,31,306/-. This resulted in total loss returned by assessee getting reduced to Rs.38,31,47,099/-. In other words, even after addition, assessee did not gain any profit. 5. addition was made by Assessing Officer, on ground that assessee wrongfully claimed depreciation at rate of 100% on certain assets, in terms of provisions of Section80IA (4) (i) of 2 VRS,J & TR, J ITTA No.582 of 2017 Act. Assessing Officer restricted depreciation to 15%, on ground that assessee was not entitled to claim depreciation under Section 80IA (4) (i). 6. Thereafter, penalty proceedings were initiated under Section 271 (1) (c). Assessing Officer levied penalty to tune of Rs.1,73,16,700/-, obviously calculating penalty on depreciation wrongfully claimed. assessee took defense that mistake was bona fide. However, Assessing Officer over-ruled objections and levied penalty. 7. appeal filed by assessee was allowed by CIT (Appeals), by order, dated 30.10.2014. same was confirmed by Income Tax Appellate Tribunal. As against concurrent orders of both authorities, namely, CIT (Appeals) and Tribunal, ordering deletion of penalty, Revenue is before us. 8. Substantial questions of law raised by Revenue in this appeal are as follows: 1. Whether on facts and in circumstances of case and in law, Appellate Tribunal was justified in deleting penalty levied under Section 271 (1) (c) of Act holding that excess depreciation claim made by assessee is bonafide claim without any fraudulent intention to evade tax which does not tantamount to furnishing inaccurate particulars of income warranting levy of penalty without appreciating fact that mens rea is not essential as decided by Hon ble Supreme Court in case of UOI Vs. Dharmendhra Textile Processors and others - (2008) 306 ITR 277? 2. Whether on facts and in circumstances of case and in law, Appellate Tribunal was justified in deleting 3 VRS,J & TR, J ITTA No.582 of 2017 penalty holding that explanation of assessee for excess claim of depreciation was bonafide that too when it is assisted by qualified professionals (Chartered accountants) without appreciating legislative intent as observed by Hon ble High Court of Delhi in case of Zoom Communication (P) Ltd. (40 DTR 249 (2010)) that if we take view that claim which is wholly untenable in law and has absolutely no foundation on which it could be made, assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making claim of this nature, that would give license to unscrupulous assesses to make wholly untenable and unsustainable claims without being any basis for making them? and 3. Whether on facts and in circumstances of case and in law, Appellate Tribunal was justified in distinguishing case of UOI Vs. Dharmendhra Textile Processors and others ((2008) 306 ITR 277) with that Rajasthan Spinning and Waving Mills ((2009) 224 CTR 1 (SC)) without appreciating fact that explanation 4 (a) to section 271 (1) (c) intended to levy penalty not only in case where after addition of concealed income, loss returned, after assessment becomes positive income but also in case where addition of concealed income reduces returned loss and finally assessed income is also loss or minus figure as decided by Hon ble Supreme Court in case of Commissioner of Income Tax Vs. Gold Coin Health Food Pvt. Ltd. And that too when conditions prescribed in Statute are satisfied (Rajasthan Spinning and Weaving Mills ((2009) 224 CTR 1 (SC))? 9. We have carefully considered material papers and heard submissions of learned senior standing counsel for Department. 10. At outset, it should be pointed out that two authorities, namely, CIT (Appeals) and Tribunal have held that mistake committed by assessee was bona fide mistake. On this finding of fact, no specific question of law would arise for our consideration. 4 VRS,J & TR, J ITTA No.582 of 2017 11. However, it is contended by Mr. K. Raji Reddy, learned senior standing counsel for Department, on basis of decision of Hon ble Supreme Court in Commissioner of Income Tax Vs. Gold Coin Health Food Pvt. Ltd.1, that Company, which is engaged service of qualified professionals, cannot commit mistake of this nature bona fide, and that for levy of penalty, mens rea was not necessary. 12. But unfortunately, one important aspect lost sight of by Assessing Officer as well as Revenue is that even after addition by Assessing Officer, Company was seen to have incurred only net loss. As we have pointed out earlier, loss declared by assessee after claiming depreciation at 100% was Rs.43,52,17,405/-. But, after Assessing Officer corrected error and made addition to tune of Rs.5,21,31,306/-, net loss got reduced to Rs.38,31,47,099/-. In other words, there was no profit. 13. Keeping above factual details in mind, if we have look at provisions of Section 271 (1) (c), it could be seen that no penalty could have actually resulted from addition, especially in facts and circumstances of case. relevant part of Section 271 (1) (c) reads as follows: (1) If Assessing Officer or Commissioner (Appeals) or Principal Commissioner of Commissioner in course of any proceedings under this Act, is satisfied that any person 1 304 ITR 308 5 VRS,J & TR, J ITTA No.582 of 2017 (c) has concealed particulars of his income or furnished inaccurate particulars of such income, or he may direct that such person shall pay by way of penalty,- (iii) in cases referred to in clause (c), in addition to tax, if any, payable by him, sum which shall not be less than, but which shall not exceed three times, amount of tax sought to be evaded by reason of concealment of partgiculars of his income or fringe benefits or furnishing of inaccurate particulars of such income or fringe benefits. 14. It could be seen from provisions extracted above that penalty is to be calculated on amount of tax sought to be evaded by reason of concealment of particulars of income. No amount of tax resulted from addition at least for current assessment year. Perhaps, if losses are allowed to be carried forward to future years, tax implication may arise in future. But, amount of liability that will result from such addition in future is indeterminable at least as on date. Therefore, deletion of penalty by two authorities, do not give rise to any question of law. Hence, appeal is dismissed. Consequently, miscellaneous petitions if any pending in appeal shall stand dismissed. No order as to costs. V. RAMASUBRAMANIAN, J T. RAJANI, J. 18th September, 2017 cbs 6 VRS,J & TR, J ITTA No.582 of 2017 HON BLE SRI JUSTICE V. RAMASUBRAMANIAN AND HON BLE SMT. JUSTICE T. RAJANI ITTA No.582 of 2017 (dismissed) 18th September, 2017 cbs Principal Commissioner of Income-tax -II v. Brandix India Apparel City (P) Ltd